Treatment of Operational Creditors under CIRP: An Unequal Playing Field?

The Insolvency and Bankruptcy Code (IBC), 2016, brought a paradigm shift in the insolvency framework of India by prioritizing time-bound resolution over liquidation. However, the treatment of operational creditors under the Corporate Insolvency Resolution Process (CIRP) has sparked considerable debate. Unlike financial creditors, operational creditors often lack representation in the Committee of Creditors (CoC), limiting their influence in the resolution process. This paper critically analyzes the statutory framework, judicial pronouncements, and practical implications to assess whether operational creditors are placed on an unequal footing. It explores the rationale behind the differential treatment and evaluates whether it aligns with the principles of fairness, equity, and the objectives of the IBC. The study concludes with suggestions for a more balanced approach that safeguards the interests of operational creditors while maintaining the commercial efficacy of the CIRP.